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While US dollar-pegged stablecoins are all over the news, a quieter trend is emerging across Africa: the development of stablecoins tied to local currencies.
These stablecoins promise to expand financial inclusion, reduce dollar dependency, and enable more efficient domestic and cross-border payments.
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We’ve seen a batch of ZAR stablecoins launched in recent months, among them Zaru, backed by Luno and Sanlam; ZARP, backed by Old Mutual; and ZAR Supercoin, issued by gaming company Super Group, as well as the oldest of them all, xZAR, issued by crypto exchange AltCoinTrader.
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The idea that central bank digital currencies (CBDCs) will earn the trust and support of the public is misplaced, says Hannes Wessels, general manager for Binance South Arica, in this episode of Moneyweb’s Crypto Pod. What’s far more likely to succeed are private monies like stablecoins.
“I think there’s been too much kickback against CBDCs,” says Wessels.
“You need to see South Africa for what it is. We are a liberal democracy. People don’t want this overbearing centralised approach of the CBDC.
“With a lot of respect, we’ve seen this fail in Nigeria, where a CBDC was attempted. It didn’t work. People go towards the lowest-friction option that they trust the most. And this is simply the blockchain, [which] tells you the truth. People go to where they find those two things, trust and efficiency – and stablecoins provide that.
“So rather than fight the system, I would enable the system, I would monitor the system, I would regulate the system, but I wouldn’t try to dominate it,” he says.
“I think those days of a central government currency coming from a central bank [are coming to an end] – I think we’re moving towards an age of decentralisation as we move towards an age of instant payments.
“And think that’s the way to go. Let the private guys run it, but monitor and regulate it.”
Technology is streaking ahead of regulators’ ability to stay abreast, so the market will reward those jurisdictions that encourage innovation and move fast to regulate these new forms of money without stifling it.
How will stablecoins gain acceptance?
Just as SA was a global leader in shifting bank customers to ATM cash dispensers in the 1980s, it could once again lead the way – this time by driving the adoption of stablecoins that enable instant 24/7 payments beyond traditional banking hours.
“The real adoption of this is driven not at retail level, because it’s relatively easy for a retail individual like you and I to get onto a [platform like] Binance and open both your account and a wallet,” says Wessels.
“And I think both are important because one is centralised, you get the liquidity pool, the other one [the wallet] is for custody purposes.
“You take that further, you look how quickly stablecoins found a function in Africa, faster than any other cryptocurrencies at scale.
“But then the adoption lies at merchant level. You’ve got to have a place to spend this.
“Otherwise, if you just have a stablecoin, but you now still need to go turn it into a kwacha or something in order to spend it at a local retailer, that’s where it fails. And that’s where a lot of our efforts are,” says Wessels.
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The beauty of the blockchain is that it allows for full transparency, which is a dream for regulators. The monitoring framework is already in place, so long as the wallet owners are known and identified.
“For me, this is something I think regulators should jump on very quickly because it’s going to make their lives easier,” says Wessels.
The launch of PayShap by the South African Reserve Bank, PayInc and the Payments Association of SA was a major improvement on traditional banking transfers.
However, stablecoins go a step further, offering near-instant settlement, 24/7 availability beyond banking hours, and lower costs – particularly for cross-border transactions.
Who would want a ZAR stablecoin outside of SA?
The real benefits are yet to come, as more assets become tokenised and transacted in stablecoins.
There are also opportunities to covert from ZAR to stablecoins pegged to other currencies. This is a major advance on the current system where the ZAR has little utility outside SA.
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“[Stablecoins] solve a lot of issues for the supply chain, specifically the retailer. Because if you think about your working capital velocity, that accelerates immediately because you can immediately change this into whatever you need,” says Wessels.
“And that’s the bit that we say to people, there is a real benefit.
“We’re not saying move lock, stock and barrel to stablecoins, but allocate a bit of your working capital cycle, your accounts, everything to that.”
He adds: “Give it a spin, because over time – and I know this is a bold prediction, but I still think it will happen over time – everything will become tokenised or substantially tokenised. And the earlier you are on this, you can get a competitive advantage for your business.”
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